Ask the Expert
Can We Save Secure Pensions?
Straight Answers From a Teacher-Expert
An educator for 38 years, NEA member Clare Barnett is social studies coordinator for the Danbury, Connecticut, schools.
She chairs the Connecticut State Teachers’ Retirement Fund board and has served as president of the National Council on Teacher Retirement. She spoke recently with This Active Life correspondent Mary Anne Hess.
How did you get involved in pension issues?
As a social studies teacher with an interest in law and economics, I had a natural inclination. Through CEA, I became a leader in retirement issues and represented the union on the state’s Investment Advisory Council and the State Retirement Board.
What’s the current threat to public retirement systems?
There’s a desire on behalf of the people who tried to privatize Social Security to dismantle public retirement systems. The basic strategy is: Alarm people and make public pensions look very expensive.
Then, make the public ask why they should support generous benefits for teachers when private sector employees are losing theirs. They say taking charge of your own retirement security is entrepreneurial.
In actuality, we all live in a community, and the idea that we work on behalf of one another is very much what brought teachers into the profession. Public pensions serve the common good.
What caused this threat?
More than 75 percent of pension funding comes from investment return, so market performance is a major factor. During the boom years of the ’90s, the contribution required of states and cities was often very low. After the market turned, these contributions had to increase to make up the shortfall.
Frankly, some pension systems are chronically underfunded—it’s a source of concern. But converting to a defined contribution plan, such as a 401(k), isn’t going to save taxpayers money.
Employee contributions and investment returns account for about 80 percent of the cost, so the idea that taxpayers shoulder an enormous percentage isn’t accurate. They’re paying an adequate amount to recruit and retain a quality workforce.
Remember, pension benefits are given in lieu of salary. They’re not giveaway programs.
How do cuts to private pension plans impact the public system?
Every year, there are threats on public pensions. In most cases, like California and Colorado, labor unions, pension fund trustees and the public pension community are able to fight back and win. West Virginia returned to a defined benefit plan because it was affordable and a better option.
But every time a private group walks away from a defined benefit plan, there is less retirement security for everyone.
What will happen to all the people who’ve lost pensions? I don’t believe the American vision is that people just work until they die. Stripping away this security is a real threat to America and its economic future.
What challenges lie ahead?
We need to educate members about the value of the defined benefit plan. That will make them better advocates for preserving it. In my state, we’ve been doing workshops with the CEA’s younger members. Our retirees are one of the most vocal and vigilant groups when it comes to saving public pensions. Their efforts have been heroic.
Defined benefit vs. defined contribution—they sound similar but there’s a world of difference.
In a traditional defined benefit retirement plan, your pension depends on a set formula, usually based on income and number of years worked. You know how much you’ll get.
In a defined contribution plan, the employer promises to put a certain amount into your retirement fund, but the guarantee ends there. If the stock market tanks just before you retire, you may wake up to a life of poverty after a distinguished career of service to the next generation of Americans.
That’s why NEA has joined with other employee organizations to fight to preserve defined benefit retirement plans. NEA developed Protecting the Retirement Security of NEA Members: A Toolkit, which can help local and state organizations fighting the push to scrap defined benefit plans.